Stephen Schweickert, controller of The ClothesTime Inc., an Anaheim Calif.-based retailer of women's apparel, thought he knew a lot about the Targeted Jobs Tax Credit -- enough, anyway, to toss it off as another one of those government programs that isn't worth the headaches and paperwork.

This spring, though, he thought he would give the program a try, using an outside firm to fill out the required forms in return for a share of the tax credits. The result: a projected increase of as much as $100,000 in ClothesTime's aftertax profits, which were $2.4 million last year.

Enacted by Congress back in 1978, the Targeted Jobs Tax Credit (TJTC) was created as an incentive for employers to hire individuals who fall into one of nine different categories, including Vietnam veterans, economically disadvantaged youths, and people referred for vocational rehabilitation. The credit equals a substantial 50% of the first $6,000 of wages paid to qualified individuals during the first year of employment (up to a maximum of $3,000) and 25% of the first $6,000 an employee earns in the second year (up to $1,500).

The TJTC program, though, has been dogged by problems, some real, some imaginary. The end result has. been that most businesses have chosen to steer clear of it. In fact, less than 5% of all U.S. businesses are expected to make full use of the credit in 1984, says John M. Elliott, president of Target Tax Consultants Inc., a Newport Beach, Calif., consulting firm.

One problem is that many people believe that only undesirable workers can qualify for the credit. "Employers," Elliott observes, "think of TJTC as a program that requires them to hire society's outcasts." But, as ClothesTime discovered, that is not the case at all.

The $100-million-a-year company, which has some 1,800 employees at its 144 stores, discovered that about 20% of the people it had already hired would meet the requirement for TJTC certification. So when ClothesTime started to cash in on TJTC, it required no changes in its hiring policies. "Between April 17 and June 30," Schweickert explains, "69 of the 387 people we have hired have been found to be TJTC-qualified -- most of them young people hired for retail sales jobs."

Another problem is that some business owners are convinced that taking the credit will prompt Internal Revenue Service audits. "That's simply not true," declares a spokesperson for the IRS. Adds Samuel P. Starr, a tax manager in the national tax office in Washington, D.C., of Coopers & Lybrand, the Big Eight accounting firm, "Our experience is that claiming the credit does not trigger an audit."

Chief executive officers also assume that the credit is for fast-food restaurants and other businesses that hire large numbers of young people -- another myth. "Anyone who is hiring entry- and intermediate-level people will find that probably 18% to 20% of those individuals are eligible for the Targeted Jobs Tax Credit," Elliott states flatly. "An eligible person," he goes on, "can fit into almost any type of business. It can be a 24-year-old individual who is working as a bank teller, an assembler, a window washer, a secretary, a salesperson, a parking lot attendant, or a clerk in a liquor store or a grocery store."

What's more, the rules can be loosely interpreted. Take the classification of economically disadvantaged youths: people who are 18 to 24 years old and who have earned less than about $2,000 in the past six months. "In this category," Elliott notes, "you could have an individual who is the son of a physician, lives in Beverly Hills, just graduated from law school, but is not a dependent of his parents. In the last six months, he has earned $1,600 doing a little law clerking. Irrespective of the fact that he is a law school graduate and that his father is wealthy, he's 24 years old, and he's eligible for the credit."

Eligibility aside, many business owners don't even know the credit exists. "The government," explains Lee Fremont-Smith, president of Transitional Employment Enterprises Inc. (TEE), a Boston-based employment agency that specializes in job placements for TJTC-eligible workers, "has made no attempt to market this program to business, so many businesses don't know about it. Government," she continues, "promulgates policies and casts them out like bread upon the water, assuming that something is going to happen . . . then [seems] surprised when it doesn't."

Companies that do know about the credit complain about the paperwork involved -- and they have a point. An employer must make a written request to the local state agency for a determination of TJTC eligibility on or before the employee's first day of work. The employee must secure a voucher from the state employment office and return it to the employer, who then completes the voucher, files it with the state, and requests certification. Businesses are also legitimately concerned about the questions they must ask to determine TJTC eligibility. These questions, experts concur, could leave corporations open to charges of discrimination. "Companies," explains TEE's Fremont-Smith, "are worried that if they find out someone is on welfare, then decide they don't want to hire that person or they want to get rid of that person, the person can claim it was because [he or she was] on welfare or is handicapped."

The issue of discrimination is surmountable, however, and so is the problem of paperwork. Businesses can do the work themselves if they will take the time to learn the system. And there are numbers of outside organizations -- TEE and Target Tax, among them -- that are available to help companies walk through the TJTC maze.

Again, consider ClothesTime. The system Target Tax put into place for the women's clothing retailer works like this: People who apply for jobs at any of ClothesTime's stores are asked a number of simple, routine questions. "Have you turned 16 years of age but not yet turned 25?" is one. Another is, "Are you a Vietnam veteran?"

If the job applicant answers yes to any of the questions, he or she may be eligible for TJTC. So the interviewer briefly explains the tax credit program. The job applicant is then instructed to call Target Tax by dialing a toll-free number. "The Target Tax operator," Schweickert explains, "will then go through the entire interview process to see if the person will then qualify for the credit." If the applicant does qualify, Target Tax will take care of the red tape -- filing forms, documenting the eligibility of the individual, and making appointments for the applicant to visit the local job-service office.

Target Tax's fee for all this is one-third of the tax credits ClothesTime claimed. "If we earn a credit of $100," the controller explains, "we pay Target Tax $33.33, and that's a tax-deductible expenditure." The money, he says, is well spent.

Schweickert's only worry is that Congress, in its present deficit-reducing mood, may decide to do away with TJTC. He is right to be concerned. Although it granted the credit a one-year renewal this past summer, Congress may wipe it out the next time around. The reason? Businesses aren't taking advantage of it.